Linspire Keeps Focus On Pre-Loaded PCs

Taking Stock of Linspire

August 31, 2004

By
Jacqueline Emigh

In mid-July, Lindows agreed to change its name to Linspire as part of a court settlement with archnemesis Microsoft. Now, with $20 million in hand from Microsoft, also due to the settlement, the company will put more emphasis on business deals around pre-installed Linux PCs, said Michael Robinson, Linspire's president.

In an interview with LinuxPlanet, Robinson used the term "ferocious" to describe Microsoft's legal attacks on Lindows. During a long series of court suits, Microsoft contended that the Linux name impinged on the Windows trademark.

"[Microsoft] bombarded us from many countries. But that's to be expected when you are trying to break into a monopolized market," Robinson told LinuxPlanet.

In the court settlement reached earlier this summer, Lindows agreed to change its name to Linspire, transfer any Lindows-related domain names to Microsoft, and stop using the Lindows name. That name change became official as of Sept. 1, according to a release from the company.

In exchange, Microsoft agreed to pay $20 million to Lindows, and also to give the Linux start-up a four-year royalty-free license for Windows media formats.

Then, about two weeks ago, Lindows/Linspire decided to hold off on earlier IPO plans, after per share pricing for 4.4 million shares of stock fell from an expected $9 to $11 to the $5 to $7 million level. However, the Linux desktop software vendor did not withdraw its SEC registration, originally made under the Lindows name.

"At the time of the SEC filing, our official name was Lindows Inc.," Robinson said this week. "We are (now) in the process of transitioning our name from Lindows to Linspire. We are (also) in the process of changing the Web site, products, marketing literature, etc. We hope to be completed over the next 60 days."

So how is Lindows/Linspire spending the $20 million from Microsoft? "One can't underestimate the amount of capital it takes to successfully compete with Microsoft," according to Robinson.
"Linspire is not a bank, so saving money makes no sense. We are investing to build a profitable company in the desktop business. Any capital we raise--through whatever channel--will go towards meeting business objectives. The biggest expense we have is people, so more capital allows us to invest in more people," he said.

"My belief is that the technology is sufficiently solid to make desktop Linux practical for many consumers. That couldn't be said until very recently," he added. Yet the San Diego-based vendor now intends to pursue this market mostly through bundling deals.

Linspire still sells its desktop OS software and IM (instant messaging software) as standalone products both over the Web and in retail stores.

"But our belief is that the only way desktop Linux is going to succeed is if it is sold preinstalled on desktops and laptops. So this where we are (now) focusing our energy," he said.

Also this summer, the vendor announced VOIP-enablement for its Gaim IM software. Version 5.0 of the company's desktop OS software is slated to ship later this year. "But the majority of significant achievements Linux will make in the coming years will not be technology-related," according to Robinson.

"Instead, they'll be business developments that educate consumers about desktop Linux and make it easy for consumers to buy Linux machines," he noted.

Lindows actually started signing up partners for Linux desktop bundling deals about two years ago. Although Wal-Mart was one of the first, most of Lindows' early OEMs were mom-and-pop stores.

"We've now graduated to regional chains like Fry's Electronics, PC Club, and Micro Center," he said. All together, the company now has about 350 retail partners, selling bundled machines in about 1000 store locations.

Robinson, though, wants to follow this direction a lot more in the future. "We're proud of what we've accomplished. But we've hardly made a dent in Microsoft, maybe just scratched the paint," he said.

"Equally important to the number of stores is the commitment they have to marketing Linspire products. Simply putting a product on a Web site or store shelf only has (only) so much value. What you need is for those retailers to actively market Linux products, and that's what many are doing. TV ads from retailers are now touting the advantages of desktop Linux. That's great news for Linux because it's getting the message in front of the non-technical crowd."

Meanwhile, Lindows/Linspire has opened up a satellite office in Mexico, to sell bundled Linux systems through Elektra and other retailers in Latin America.

In filing to postpone its IPO, the company cited market conditions. "The IPO market for all companies is very tough right now. I don't think it's a reflection on the technology business or Linux. It's simply that the market for new issuances is soft," Robinson elaborated this week.

But will Linspire ever IPO? Citing a quiet period, Robinson declined comment on "the prospects (for an IPO) going forward."